Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 4%, and the market's average return was 11%. Performance is measured using an index model regression on excess returns. Stock A Stock B 18 + 1.2(rM - rf) 28 + 0.8(IM - re) Index model regression estimates R-square Residual standard deviation, o(e) Standard deviation of excess returns 0.683 0.49 12.1% 20.98 23.48 28.58 a. Calculate the following statistics for each stock: (Round your answers to 4 decimal places.) Answer is complete but not entirely correct. Stock A Stock B i. Alpha 1.0000 % 2.0000 il. Information ratio 0.0826 0.0957 Sharpe ratio 0.5042 0.3228 iv. Treynor measure 9.8333 % 11.5000
Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 4%, and the market's average return was 11%. Performance is measured using an index model regression on excess returns. Stock A Stock B 18 + 1.2(rM - rf) 28 + 0.8(IM - re) Index model regression estimates R-square Residual standard deviation, o(e) Standard deviation of excess returns 0.683 0.49 12.1% 20.98 23.48 28.58 a. Calculate the following statistics for each stock: (Round your answers to 4 decimal places.) Answer is complete but not entirely correct. Stock A Stock B i. Alpha 1.0000 % 2.0000 il. Information ratio 0.0826 0.0957 Sharpe ratio 0.5042 0.3228 iv. Treynor measure 9.8333 % 11.5000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Problem 24-9
Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was
4%, and the market's average return was 11%. Performance is measured using an index model regression on excess
returns.
Stock A
Stock B
Index model regression estimates
18 + 1.2(rM - rf)
28 + 0.8(IM - rf)
R-square
Residual standard deviation, o(e)
Standard deviation of excess returns
0.683
0.49
12.1%
20.98
23.48
28.58
a. Calculate the following statistics for each stock: (Round your answers to 4 decimal places.)
Answer is complete but not entirely correct.
Stock A
Stock B
Alpha
Information ratio
i.
1.0000
%
2.0000
ii.
0.0826
0.0957
ii.
Sharpe ratio
0.5042 *
0.3228
iv.
Treynor measure
9.8333 O %
11.5000
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